On Monday, Piper Sandler adjusted its outlook on KLX Energy Services Holdings Inc (NASDAQ:KLXE), reducing the price target from the previous $11.50 to $6.50, while maintaining a Neutral stance on the stock. The adjustment follows a reassessment of the company's financial projections, aligning with medium-term industry multiples.
The firm's analyst cited a recalibration of price targets based on 2024 and 2025 financial estimates, applying a 4 times multiple on the expected 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), a revision from the prior 3 times multiple. This change is predicated on the anticipation of $76 million in EBITDA, with first quarter 2024 actual net debt at $200 million and 16 million fully diluted shares outstanding.
The analyst notes that the revised price target reflects a view that the company's financial estimates may be reaching a floor. The outlook considers several factors that could impact KLX Energy's performance, including the broader oil and gas market dynamics, spending discipline among exploration and production companies, operational service sector overcapacity and fragmentation, environmental, social, and governance (ESG) challenges, as well as the company's balance sheet leverage.
KLX Energy Services, a provider of completion, intervention, and production services in the oil and gas industry, faces a complex landscape marked by various risks. The industry is navigating through a period characterized by fluctuating oil prices, a focus on sustainability, and the financial prudence of oil and gas firms, which collectively influence service providers like KLX Energy.
InvestingPro Insights
As investors digest the revised outlook from Piper Sandler on KLX Energy Services Holdings Inc (NASDAQ:KLXE), it's worth noting that the company's financial health and market performance are key factors in assessing its future. According to InvestingPro data, KLXE's market cap stands at a modest $99.01 million, with a negative P/E ratio of -7.59, reflecting the challenges the company faces in achieving profitability. The price/book ratio, last recorded at 5.86, suggests a premium compared to the book value of the company's assets. Furthermore, the company's revenue has seen a decline of 5.22% over the last twelve months as of Q1 2024, indicating headwinds in the company's top-line growth.
Considering the InvestingPro Tips, analysts are not optimistic about KLXE's profitability in the near term, highlighting the expectation of a net income drop this year. Additionally, the stock's price has experienced significant volatility, with a 36.47% decline over the last three months and a 40.28% drop over the last six months, signaling a bearish trend in investor sentiment. It's also worth mentioning that KLXE does not pay a dividend, which could affect its attractiveness to income-focused investors.
For those looking to delve deeper into KLXE's prospects, InvestingPro offers a comprehensive suite of tools and additional tips. There are 10 more InvestingPro Tips available that could provide further insights into KLXE's financial health and market position. To access these valuable resources, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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